XN000022-1995-12-13 — Page 49

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Answer:

(a)&(b)The Stock Exchange of Hong Kong (SEHK) is the front line regulator responsible for the supervision of listed companies and the administration of all related matters. The SFC oversees the SEHK but is not directly involved in such matters,

The SEHK reviews the performance of all newly listed companies, including H share companies, for the first accounting year after their listings, and compares that with the projected profits stated in the respective prospectus of the companies.

All listed companies are required to sign a Listing Agreement and to abide by the SEHK Listing Rules. Under the Listing Agreement, a listed company is obliged to notify shareholders promptly of the occurrence of any event which could cause the forecast assumptions to be materially different from those stated in the prospectus and to indicate the likely impact of such event on the projected profits. The Listing Agreement also requires a company in such circumstances to include an explanation for such material difference in its directors' report and accounts.

The SEHK monitors compliance with the Listing Rules and carries out inquiries where necessary. During the past three years, the SEHK has found two cases (one of which involves an H share company) where the actual results published in the directors' report and accounts differed materially from the projected profits stated in the relevant prospectus. In both cases, the company involved has issued a clarification statement to the public in accordance with the relevant Listing Rules.

(c) There are no statutory provisions which expressly impose special responsibilities on merchant banks for the accuracy of prospectuses. However, there are statutory provisions under which merchant banks could be exposed to criminal and civil liability in respect of untrue statements in prospectuses. Such liability is imposed on every person who has authorised the issue of the prospectus containing untrue statements. Coming within the wide class of persons who authorise the issue of the prospectus can be brokers, merchant banks, solicitors and others associated with the prospectus.

Civil liability is created by section 40 of the Companies Ordinance (the Ordinance) in respect of Hong Kong companies, and section 342E of the Ordinance in respect of companies incorporated outside Hong Kong. The liability is to persons who subscribe for securities on the faith of a prospectus and sustain loss or damage by reason of any untrue statement contained therein.